Dax breaks the neckline

The decline of stocks is probably the most important event in the financial markets. Some of the indices are resisting the decline, some of them are leading and today we will talk about the DAX, which beat the lows from 2018 and 2017 so, in my opinion, belongs to the second group of the instruments.

Dax, the most important German index made a choice last week and broke the neckline of the giant Head and Shoulders pattern. We could have finished our analysis here as that sorts out the situation and sends bulls back home. Last week, price broke the lower line of the wedge and the neckline (yellow), which is a very technical sign of a bearish dominance. The distance between the top of the head and the yellow line is almost 2000 points, which means that we should expect the drop similar to that. This is just a theory but in my opinion, in this case, it is very probable.

The sell signal will be denied, when the price will come back above the neckline, which as for now, is less likely to happen. The rise that we see today is just a normal pull-back and cannot be considered as a reversal, yet.

This article is written by Tomasz Wisniewski, a senior analyst at Alpari Research & Analysis